Governor Kathy Hochul's plan to tax luxury second homes in New York City is getting a makeover. Instead of a one-size-fits-all levy, the proposal would roll out in two phases, as state officials grapple with the city's byzantine property valuation system, according to a New York Times report published Thursday.

Here's how it would work: In the first phase, the tax would apply to second homes with at least $1 million in assessed "market value." But don't let that number fool you—Hochul's office says a property with a $1 million assessed market value could actually sell for around $5 million. For the first two years, qualifying second homes would face an additional tax surcharge between 4% and 6.5%.

After that, the city and state plan to switch to a different valuation system based more directly on estimated sales prices. In this second phase, homes valued at over $25 million could face a 1.3% tax.

Revenue Goal

The proposed tax is expected to raise about $500 million annually to help plug New York City's budget deficit. Jen Goodman, a spokeswoman for Hochul, told The New York Times that the goal is to ask "some of the wealthiest people in the world to contribute a bit more" while avoiding broader damage to New York's tax base.

Investor Backlash

Unsurprisingly, the proposal has already triggered pushback from investors, developers, and wealthy homeowners. Earlier this month, billionaire investor Ken Griffin criticized New York Mayor Zohran Mamdani over a campaign-style video filmed outside Griffin's $238 million apartment at 220 Central Park South promoting the tax. Griffin called the video "creepy and weird" and warned that New York was becoming less welcoming to wealthy investors and businesses.

Citadel executives have also warned that the company could reconsider its involvement in the planned $6 billion redevelopment of 350 Park Avenue as tensions around the proposed tax continue to escalate.

Investor Kevin O'Leary also criticized the proposal last month, arguing that luxury second-home owners generate construction activity, property tax revenue, and related economic spending while placing little strain on city services.

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